All guns blazing for Mighty Power IPO

Australian fund managers might again find themselves crowded out by US and Asian investors – as was the case with Kiwi dairy group Fonterra’s recent $NZ525 million equity raising – when the float process starts in earnest next month for the NZ government’s 49 per cent stake in Mighty River Power.

The Maori Council this week lost its initial legal bid to delay the partial privatisation of the power producer and is working on an appeal. Even so, the float’s joint lead managers, Credit Suisse/First NZ, Goldman Sachs and Macquarie, have been instructed to get cracking on updating the offer details with a listing pegged for April.

If 49 per cent of Mighty River is sold, it would mean an equity raise of roughly $NZ1.5 billion. Whether the electricity company, which operates nine hydro power stations, four geothermal plants and a multi-unit gas-fired station, will be dual listed is still to be determined.

However, sources tell Street Talk the NZ government is leaning towards a listing just on the New Zealand sharemarket.

More than 90 per cent of Mighty River’s electricity production is from renewable sources. Its core business is based on reliable, low fuel-cost electricity generation complemented by sales to businesses and homes, which account for about 18 per cent of New Zealand’s total electricity consumption.

The JLMs will no doubt be hoping Mighty River achieves a similar level of success to that of Fonterra. There were some disappointed fundies when Fonterra stock was allocated, with a number reporting “doughnuts" despite placing what they thought were aggressive bids.

New Zealand is preparing for a raft of privatisations over the next two years as
John Key
’s government seeks to bolster its balance sheet. Stakes in three more energy producers are up for sale, as is a slice of the national air carrier, Air New Zealand. Mighty River will be followed by either Genesis Energy or Meridian Energy in the second half, with Genesis tipped as the favourite.

The Maori Council says the Mighty River selldown is in breach of a 172-year-old treaty. The group wants a share of the private sector profits to be generated from the use of its land.